Effective Business Apologies: The Innovators

Businesses should learn that making effective apologies can be the smartest strategy when they make mistakes.

Tiger Woods' recent apology in the wake of allegations that he'd had extramarital affairs has undoubtedly exacted a tremendous personal price. It may also cost him any of several lucrative endorsement deals.

Woods' heretofore sterling reputation has already taken a beating, and it may get worse as details of his alleged indiscretions emerge. (In a poll taken by TheStreet this week, almost two-thirds of respondents agreed that brands connected to Woods risk having a stigma attached to them.)

Although sponsors like Chevron ( CVX), Nike ( NKE), PepsiCo ( PEP) and Procter & Gamble ( PG) have said that they'll continue to support Woods as he tries to sort out his personal situation, they may well conclude over time that Woods' endorsement has lost its shine and switch to less controversial spokespeople.

Woods' predicament demonstrates how tricky it can be for a celebrity to make an effective apology, and it's no easier for a corporation. Companies have shied away from making public apologies. Some of their reluctance may be tied to the risk of litigation. Historically, defense lawyers have viewed corporate apologies as little more than nicely phrased admissions of liability and have urged their clients to avoid apologizing whenever possible.

But businesses might be wise to learn from the medical profession when it comes to apologies. Faced with skyrocketing malpractice insurance rates, many hospitals have instituted programs to admit mistakes, apologize and offer restitution before medical errors generate costly malpractice lawsuits. Such programs are proven to save time, stress and legal fees. They also allow doctors to talk openly with injured patients and their families, which can strengthen relationships between physicians and their patients. The apology movement in the medical profession has its critics, but its overall success is something the business community can learn from.